Newsletter

Kansas likely to seek waiver

If the testimony and public comments submitted during a fact-finding hearing Monday are any indication, Kansas Insurance Commissioner Sandy Praeger soon will be filing for a waiver to the medical loss ratio in the federal Affordable Care Act, more commonly known as federal health care reform.

The medical loss ratio stipulates that carriers in the individual health insurance market must spend 80 percent of every dollar received in health insurance premiums on claims, which leaves the carriers 20 percent for administrative costs and profit.

Health insurers who don't meet the 80-20 standard will have to provide refunds to consumers beginning in 2012.

Praeger conducted the hearing, held at the Maner Conference Centre, at the request of insurance agents who sell individual health care policies. Prager also has heard from insurance carriers on the subject and hopes to have all the information compiled by March 21.

If the decision is made to seek a waiver, Praeger said, she would like to get something filed as soon as possible.

Praeger told those who attended the hearing that the federal Department of Health and Human Services issued the first such waiver last week to Maine, which set its medical loss ration at 65 percent.

Under the Affordable Care Act, insurance companies can count reimbursement for medical services and the cost of activities to improve health care quality as money spent on claims. All other expenses, including insurance agents' commissions and brokers' fees, are considered administrative costs.

Several insurance agents testified Monday that carriers had responded to the medical loss ratio and the possibility of paying refunds by drastically reducing their commissions or eliminating them altogether and bypassing agents. As a result, fewer agents are writing individual health care policies.

Without agents, there is no one in the system to advocate for the consumer, said Robert Richey, an independent agent from Wichita.

Terry Dressman, of Terry Dressman and Associates in Overland Park, said it fell to agents to make sure people get the services they should under their policies.

The ACA and response by health insurance carriers to cut commissions have harmed the livelihoods of agents and disrupted the market place, he said.

Scott Day, of Day Insurance Solutions in Topeka, said many agents are moving away from health insurance work because ACA has made it more difficult to sell health insurance and keep individuals and small employers in the market.

Without agents, he said, customer service won't be a priority.

Day said his company sells health insurance for three carriers. One of those cut commissions by 50 percent, and another cut commissions by 40 percent. A third left its commission unchanged, he said, but it already was paying lower commissions.

Michael Murphy, chief executive officer of Coventry Health Care of Kansas, with headquarters in Kansas City, Mo., urged Praeger to seek a waiver that would set the medical loss ratio at 65 percent for 2011, 70 percent for 2012 and 75 percent for 2013 to give carriers time to adjust and make changes to their businesses.

An 80 percent ratio would destabilize the insurance market and Kansans would have fewer coverage choices, which will lead to higher premiums and force people to discontinue their coverage.

Rules drafted by HHS allow application for a waiver to the medical loss ratio if the 80 percent stipulation would make it difficult for individual consumers to access agents and brokers.